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RBC Wealth Management senior vice president Reva Shakkottai breaks down how you can benefit from prisons.
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Cost for correctional facilities -- in -- president.
Quadrupling in the past twenty years to 52 billion dollars in the US put taxpayers on the hook for much of that.
Is there -- way you can actually make crime pay our next guest says you bet.
-- the -- -- ties senior vice president RBC wealth management.
And she joins us now thanks for being with us -- -- thank you -- -- let's just go broad picture first the US is the most prison prone country in the world right tells about that.
We have 2.3 million inmates in the state prison system and the federal prison system and -- local -- there is a different trend prison and jail.
Yes it's -- one year but does not a -- Louisiana one and 86 people 186 absolutely.
If you look at the country as a whole it's one and one have four.
Not if you look at both for rolling east and probation in addition it's -- -- 33 people who are in.
The state or federal prison system.
Right in California says seven times many prisoners as Iran the entire country death at yes absolutely -- there's really demand here.
Now most times when people think about trying to make money on prisons they look at that publicly held prison -- for profit -- -- get CXW.
And GE O but you think those guys by the kind of played out -- that.
Then -- of those.
I think companies really happened post 9/11 when the US Marshals Service and ice which is immigration custom enforcement.
Got the contracts to.
Fifteen.
Immigrants -- did you percent of our immigrant detainees and the private prisons did not -- the -- if you build it they will come but there's in this match with the need.
They have excess capacity but it doesn't exactly fill the need of the public present system.
Okay take on -- they need to be so if we get rid of CXW Ngo instead you like a couple of actual California state prison bonds tell us about though.
California that operates just about the biggest prison system in the country.
You have an occupancy rate of these prison and a 155%.
There's the demand.
Definitely outstrips the supply so there's this as -- have a fixed income market called lease revenue bonds.
And this is a -- on the municipal bond market it's a more conservative approach to playing a prison market.
Of lease revenue bond the -- the prisons compared to a general obligation bonds same maturity.
Can yield ten to 50% more a prison bond more than a regular government bond from a local government.
From a state government right so from that front but California geo perspective.
My jail bonds as a highly speculative and that's where you hear about the.
I see now in addition to California.
Are all state bonds kind of -- to look at for -- purpose -- to all state bonds pay higher than their regular general obligation bonds there's a couple of states that you -- really looked like California Texas Florida new York and Michigan.
These are the biggest issuers of the lease revenue bonds that fund correctional facilities.
So for spending -- hungry and bastard that's looking for relative value I think there's a huge opportunity in these bonds that are.
Actually under followed by the market and their tax free as well -- tax free income -- -- And that it part of plays into your senior your client call -- the grave dancer -- you like to put money into things where the customer has little choice you feel like cigarettes people are addicted to gambling even have some addicts.
And certainly in prison the customers have no choice but to be customers don't that.
Yeah absolutely any there's no other place ago I think that the country will stop at nothing.
To protect public safety so I think that the prison markets a great -- -- to -- -- profit from all right thank you very much for being with us rabies -- -- time appreciate it inevitably.
